States With Low Income Taxes Don't Have Better Economic Growth: Study

Right now in Michigan, there's a push to cut the state's income tax in the hopes of kick-starting the local economy. Other states have similar efforts in the works, but the move may do little to provide an economic boost.

According to a Bloomberg analysis of numbers from the Institute on Taxation and Economic Policy, the states with the highest personal income tax rates -- places like Oregon, New York, Maryland, Vermont and California -- did a much better job of weathering the turbulent 2000s than low-tax states like Nevada, Texas, Florida, Tennessee and New Hampshire.

Still, that may not be a conclusive argument for high income tax rates. Lots of other factors come into play here. It seems doubtful, for example, that higher taxes would have done much to prevent the foreclosure avalanche that buried Florida and Nevada and scudded both states' economies. And New York's high tax rate wouldn't have done as much for the state if there weren't all those gigantic Wall Street bonuses to levy taxes on.

Still, like an earlier study showing that higher state taxes probably won't send local millionaires running for the hills, ITEP's findings cast doubt on the full-speed-ahead damn-the-tax movements underway in Michigan, Maine, Kansas and elsewhere.

Over the past decade, household incomes fell by a much higher percentage in the low-tax states than the high-tax ones -- so while high taxes may not be a recipe for quick growth, low taxes seem like an even more dubious route. Especially when low income taxes are paired with high other-kinds-of-taxes in the same state.